Friday, November 30, 2018

The “Brady Bunch” of Facilities

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Our week was highlighted by two meetings which were of particular interest - thus my desire to share. Common among both operations with whom we met was the recent acquisition of a competitor.

Akin to the comedy sitcom of the 1960’s - The Brady Bunch - where two families were melded into one - both companies now find themselves with the task of managing the excess or inefficient capacity.

As you know, if you’ve watched reruns - Marsha, Greg, Bobby, Cindy, Peter, Jan, Mike, Carol, and Alice ultimately co-habituate peacefully - although five seasons and 117 episodes were consumed telling “the story of a man named Brady.” A similar saga occurs when two businesses are joined at the hip.

In the first case, growth had occurred organically - with great products marketed to a number of customers who saw the value and bought more. With an increase in sales and the need for more space - each operator looked to proximate buildings to house the explosive up-tick in orders. Each enterprise functioned - albeit a bit clunkily.

Flash forward. Packaged were two groups that essentially served the same buyers but from different operating facilities. The “marriage” created a behemoth of inefficiency - with receiving, manufacturing, storage, shipping, sales, marketing, accounting, and management essentially quintuplicated. 

Now considered is a consolidation into one facility - essentially moving the Bradys into a house in Studio City. Carefully vetted in the weeks ahead will be the disruption of production, moving costs, future needs, available buildings, disposing of the existing lease obligations, and return on investment. Should be fun!

Our second group achieved its size through acquisition. Consumed was any competitor in its path. Awesome. But the wake is similar to the Brady union - you’ve two sets of kids - pairs of whom are the same age. In commercial real estate parlance - the business has duplicated its distribution footprint serving the same geography. Complicating the equation - a trend in logistics - higher ceilings and larger truck courts. Allowed is the occupation of fewer square feet - stacked higher with product and accessed by longer trucks containing more inventory.

 Ultimately, a distributor can occupy fewer square feet and store the same amount of stuff. We now must figure out where the employees live, proximity of the centers to their customers, and the right sizes for the mirrored buildings. Just a simple puzzle to solve!

Stay tuned in the week’s ahead for an update on our progress.

Allen C. Buchanan, SIOR is a principal with Lee & Associates Commercial Real Estate Services. He can be reached at 714.564.7104 or abuchanan@lee-associates.com  his website is allencbuchanan.com